Hot Off the Press: Arena Pharmaceuticals Earnings

We're right in the middle of earnings season, and VIVUS (Nasdaq: VVUS  ) , Arena Pharmaceuticals (Nasdaq: ARNA  ) , and Orexigen Therapeutics (Nasdaq: OREX  ) “ -- fierce competitors in the weight-loss drug space -- decided to report their third quarter results within a mere 36 hours of each other.

VIVUS was the first to report Tuesday morning, and the market didn't take kindly to initial sales of its flagship drug Qsymia. Revenue was far below the market's expectations, and VIVUS shares slumped more than 20% by the end of the day.

Arena reported its quarterly results after the market closed yesterday. How did VIVUS' chief rival fare? Will Arena investors see a repeat of yesterday's plunge? While the market can be difficult to predict, here are a few first impressions.

Better than expected
Arena and its commercialization partner, Japanese drugmaker Eisai, plan on making Belviq available to patients early in 2013 after the DEA completes scheduling for the drug. For that reason, Arena's report was devoid of any sales figures or projections.

The company chalked up only $1.49 million in revenue and posted a net loss of $0.07 per share. Data from Yahoo! Finance reveals that analysts were expecting revenue to top $3.5 million, but they were also expecting a heavier loss at $0.09 per share. Cutting back on expenses helped Arena beat estimates at the bottom line this quarter.

Looking abroad
One of the biggest surprises in this report was Arena's announcement of a partnership with South Korean drugmaker Ildong. As part of the deal, Arena will receive upfront and milestone payments, and possibly tiered payments for manufacturing Belviq for Ildong should the drug be commercialized in South Korea.

While this is certainly a smaller market than the U.S., Arena's strategy to forge new partnerships and attempt to grow drug sales internationally should incrementally boost revenue over the long term. Arena is also seeking approval in the EU and Switzerland, but investors will probably have to wait until mid-2013 before approvals or rejections are handed out.

What's next?
Arena's future is aligned with Belviq's success. If this drug's sales prove to be strong when it's launched in the first quarter of next year, then there is every reason to believe that sales could continue to ramp up in the coming years.

However, VIVUS' massive drop yesterday should serve as a cautionary tale. Remember that only 20% of Qsymia prescriptions are currently covered by insurance. Many patients were deterred by the high out-of-pocket expenses, and this was a main factor in driving down VIVUS' revenue this quarter.

It's possible that Belviq could face the same fate when it becomes available, and the market may have to temper its expectations of both drugs' initial sales. After all, Belviq and Qsymia are the first obesity medications to gain Food and Drug Administration approval in 13 years, and, while these drugs may eventually become huge sellers, they simply will not be blockbusters overnight.

More information about Arena's risks and potential can be found in the Fool's new premium research report on the drugmaker. To get the full scoop on Arena's potential as an investment -- including reasons to buy, sell, and an in-depth analysis of the challenges it's facing -- click here now to learn more.


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